The City is in line for a major boost after European finance ministers agreed
to position the new banking super-regulator in London, rather than
Frankfurt.

In a scheduled meeting on Tuesday, the Ecofin council, which comprises Chancellor George Osborne and his counterparts from each member state, decided unanimously that London was the natural place for the new European Banking Authority (EBA).

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Members of the European Parliament had proposed positioning watchdog, which will have powers over national supervisors, next to the European Central Bank in Frankfurt.

Mr Osborne said that having the regulator in London was a "key UK requirement" for which he had won "support from other member states".

Talks with the European Parliament will now resume but all sides are thought to want to secure an agreement quickly. The EU aims to have three new Europe-wide institutions regulating banks, insurance companies and securities markets up and running by January 1, 2011.

The vote for London, which is an important win for the Chancellor, will be welcomed both by British and international banks which have felt increasingly persecuted by European regulators.

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A source close to the meeting said: "The Ecofin council recognised that London is Europe's only truly global financial centre. The others might not like that but there's no point pretending otherwise and this is recognition of that."

The European Parliament, European Commission and national governments are debating the powers and positioning of the three new European financial regulators.

The EBA will replace the Committee of European Banking Supervisors, or CEBS, which co-ordinates national agencies and is based in London. Under the proposals, the EBA could take direct control of "systematically important cross-border financial institutions."

Under plans put forward by the European Parliament, the super-regulator may also have powers to temporarily ban financial products it felt posed to much risk.